The long-term threat of Iranian control over the Strait of Hormuz, one of the world's most important trade routes, is forcing Gulf states to rethink their strategy. Senior energy industry officials told the Financial Times that countries in the region are now examining costly and complex plans to build new oil and gas pipelines that would bypass the strait, out of an understanding that this may be the only way to ensure continued exports.
The current conflict has underscored the strategic importance of Saudi Arabia's 1,200-kilometer east-west oil pipeline. Built in the 1980s out of concern that the strait could be blocked during the Iran-Iraq War, the pipeline is now emerging as a critical lifeline. It carries about 7 million barrels of oil a day to the Red Sea port of Yanbu, completely bypassing Hormuz. "In hindsight, that pipeline looks like a stroke of genius," a Gulf energy industry executive said.
Amin Nasser, chief executive of Saudi oil giant Aramco, recently confirmed that the pipeline is "the main route we are relying on right now." Riyadh is now examining how to increase the volume of its exports, currently standing at 10.2 million barrels a day, through pipelines, whether by expanding the existing line or laying new routes. The kingdom is also considering building additional export terminals on the Red Sea, including at the deepwater port under construction as part of the Neom project.
'Taking fate into our own hands'
In the long term, the new pipelines are expected to be integrated into broader trade routes. A Gulf official told the Financial Times that one option now being considered is reviving the ambitious US-backed IMEC plan for a corridor stretching from India through the Gulf to Europe. The original plan, as previously outlined, included a complex pipeline that was supposed to reach the port of Haifa.
Yossi Abu, chief executive of NewMed Energy, said he was confident pipelines to the Mediterranean would indeed be built, whether ending at ports in Israel or Egypt. "People need to control their own destiny, together with their friends," Abu told the Financial Times. "We need oil pipelines and rail connections across the region, over land, without giving others choke points to strangle us."
Minefields and political obstacles
Despite broad agreement on the need for such a move, the obstacles are enormous. Christopher Bush, chief executive of Lebanon's CAT Group, which helped build the existing Saudi pipeline, estimated that replicating the pipeline today would cost at least $5 billion because of the need to carve through basalt mountains. More ambitious plans crossing several countries, for example from Iraq through Jordan, Syria or Turkey, would cost between $15 billion and $20 billion.
Beyond the cost, there are serious security risks, including unexploded ordnance in Iraq and the continued presence of Islamic State and other terrorist organizations. The southern option of pumping oil to ports in Oman also faces difficulties because of mountainous and desert terrain.
Moreover, Oman's ports are not immune. Drone attacks in recent days even forced the key port of Salalah to shut down temporarily.
Added to that is the political challenge of managing shared pipelines. "A pipeline system would require Gulf states to abandon their isolationist policies and unite," Bush said.
While the UK is leading talks among 35 countries in an attempt to form a coalition to reopen the Strait of Hormuz, Mason Kafafy, a senior adviser at the Atlantic Council, said Gulf states understand that reality has changed.
"I sense a shift from hypotheses to operational reality. Everyone is loo king at the same map and reaching the same conclusions," she said. "I do not expect things to return to what they were before the confrontation."
